Nationwide heads up project linking energy costs to mortgages

Nationwide Building Society is heading up a research group on how to build a stronger link between energy costs, affordability and mortgage borrowing.

The ‘Lenders’ project, supported and part-funded by Innovate UK, will bring together mortgage lenders, building industry experts, green energy groups and sustainability bodies with green credentials.

It will investigate the increased use of the Energy Performance Certificate (EPC), required on every home for sale or rent.

An EPC gives a property an energy efficiency rating from A (most efficient), to G (least efficient), and contains information about a property’s energy use, typical energy costs and recommendations about how to reduce energy use and save money.

The research will test the use of EPC data in estimating energy costs on individual homes, and look at the potential to incorporate that estimate into the mortgage affordability calculation.

The aim is to encourage buyers to purchase homes with lower energy bills, and increase their willingness to invest in improving energy efficiency.

Andrew Baddeley-Chappell (pictured), head of mortgage policy at Nationwide, said: “The research will look at ways of moving away from current estimates of energy costs and towards more detailed affordability calculations based on the individual property.

“Fuel charges are the largest unavoidable household costs and may vary by a large degree.”

Baddeley-Chappell added that the detailed research data could allow lenders to acknowledge that smaller fuel costs could allow more to be borrowed on the mortgage, and as a result nudge buyers towards more efficient buildings and potentially reflect the added value of such properties.

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